Solving backward stochastic differential equations with quadratic-growth drivers by connecting the short-term expansions |
| |
Authors: | Masaaki Fujii Akihiko Takahashi |
| |
Institution: | Quantitative Finance Course, Graduate School of Economics, The University of Tokyo, Japan |
| |
Abstract: | This article proposes a new approximation scheme for quadratic-growth BSDEs in a Markovian setting by connecting a series of semi-analytic asymptotic expansions applied to short-time intervals. Although there remains a condition which needs to be checked a posteriori, one can avoid altogether time-consuming Monte Carlo simulation and other numerical integrations for estimating conditional expectations at each space–time node. Numerical examples of quadratic-growth as well as Lipschitz BSDEs suggest that the scheme works well even for large quadratic coefficients, and a fortiori for large Lipschitz constants. |
| |
Keywords: | Asymptotic expansion Discretization Quadratic-growth BSDEs |
本文献已被 ScienceDirect 等数据库收录! |